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US Crude Plunges 4% to Five-Month Low

May 4, 2017 at 16:55 by Andrew Moran

Oil prices are plummeting on Thursday as investors worry about rising global supplies and higher inventories. Despite Organization of the Petroleum Exporting Countries (OPEC) nations slashing supplies and reaching full compliance, the international market is awash in oil, and this is having a negative effect on commodity prices.

June West Texas Intermediate (WTI) crude futures cratered 4.02%, or $1.92, to $45.90 per barrel at 16:38 GMT on Thursday on the New York Mercantile Exchange. US crude is trading at its lowest level since November.

Brent, the international benchmark for oil prices, is also slipping towards the end of the trading week. July Brent crude futures fell 3.78%, or $1.92, to $48.87 a barrel on London’s ICE Futures exchange. Brent prices are also trading at five-month lows.

Crude prices are tumbling on Thursday because US data found a modest drop in US inventories. According to the Energy Information Administration (EIA), US crude inventories dipped 930,000 barrels in the week ending April 28. The EIA also reported a rise in total domestic crude production, a weakness in demand for gasoline, and a jump in gasoline supplies.

Since OPEC, as well as Russia and Oman, announced at the end of November that they would reduce output for six months at 1.8 million barrels per day (bpd), oil prices reacted with a 25% spike. Although international crude inventories have decreased, US shale producers are offsetting the declines. This is leaving investors concerned about the supply glut as US firms continue to take advantage of higher prices.

It is widely expected that OPEC members will agree to extend its arrangement at this month’s official meeting in Vienna, especially if crude prices stay below $50. Nigeria is reportedly the only country that wants to be exempted from the production freeze.

Traders do not appear to be long on oil as the latest data suggest money managers have cut their net long positions by 33% since March.

Year-to-date, US crude has fallen nearly 20%, while Brent crude has weakened close to 17%.

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